The loudest shouldn’t speak for everyone

The national spotlight was on financial advisers last week, as it almost never is, when President Barack Obama announced he was backing a fiduciary standard for brokers handling retirement accounts.

The industry is made up of many voices but is dominated by the loudest — those opposing such a standard. It chose the least-effective response and squandered a real opportunity.

The advisory industry could have risen to the occasion and used the limelight to begin to reverse its persistent public characterization: greedy, self-interested and indifferent to what regular people need and deserve. Brokers could have stepped up and said, “Yes, we do believe it’s important to act in our clients’ best interests. Here are the concerns we have with it.”

Instead, this publication, as well as those that cover the issue for consumers, received prepared statements along the lines of “White House attacks poor advisers” and “No middle-class Americans will ever be able to invest for their retirement again! Ever!”

And all before the Department of Labor’s proposal has even been released.

The greatest fears of those who oppose a fiduciary standard, that prompt their response of “shoot first, ask questions later,” involve compensation models.

But after pulling back from a proposal in 2011 amid industry uproar, the DOL has said on many occasions — and has posted on its public website — that this rule “will not prohibit common compensation practices, such as commissions and revenue sharing. It will include new proposed exemptions from ERISA’s and the Internal Revenue Code’s restrictions on fiduciaries receiving conflicted compensation, and will request public input on the final design of the exemptions.”

In that case, what will it mean to be a fiduciary? Fiduciaries will need to ensure they perform adequate due diligence on the products they offer. They also should have a process for and record of decision-making concerning what they put in clients’ retirement accounts.

That sounds a lot like what a competent adviser should already be doing. It also happens to be a wise practice in the service of covering your own behind, even if you currently operate under a more limited suitability standard.

Screaming “The sky is falling” doesn’t work with Americans. It’s tired. Even worse, it doesn’t further the cause of those proclaiming it; it does the opposite. Because anyone can see straight through arguments that big brokerages will no longer be able to afford to serve middle-income families, such scare tactics only substantiate the public’s negative impression of the financial services field. Many in the profession deserve better.

A few industry leaders did hold their fire, exemplifying decency and composure at a time when attention was on the advice profession.

In Mark Schoeff Jr.’s story on Page 1, Robert Moore, president of LPL Financial, said, “I don’t want to prejudge [the rule] … because that isn’t particularly constructive or helpful. Let’s just follow the process and see where it leads.”

Mr. Moore added, “We want to be constructively engaged.”

And the Financial Planning Coalition sensibly criticized a knee-jerk bill proposed by Rep. Ann Wagner, R-Mo., last Wednesday that would kill DOL’s effort before it even comes up for consideration, calling the legislation a “cynical attempt to undermine these critical investor protection efforts.”

But those sentiments are largely drowned out by those claiming that a fiduciary standard would mean that only the ultrawealthy could afford the industry’s services. Big surprise.

We’re not suggesting you should sit on your hands, whatever your view. And we’re not saying you can’t feel stung by the president’s focus on our industry’s rogue actors.

But let’s be reasonable. Engaging to find the most effective way to ensure that people’s hard-earned dollars work for them in retirement is a worthy endeavor. Most financial advisers got into the field for that exact purpose — to help people. It’s time to live up to that ambition.

Use this moment to broadcast the nobility of your calling.

And contact any industry groups that purportedly speak for you, and tell them you’re tired of the rhetoric — and that they’re not acting in your best interests.